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Majestic Wine reaffirms multichannel path to £500m turnover target despite falling profits

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Majestic Wine today reported growing first-half sales but falling profits, but said it remains on track to turn over £500m a year by 2019 through a strategy focused on becoming an international multichannel retailer.

The wine merchant said its drive to boost customer loyalty through improved customer service was working, with sales of £205.6m in the six months to September 26 – up by 13.2% compared to the same period last year. Within that, Majestic Wine sales grew by 5.7% on a like-for-like basis that strips out the effect of store openings and closures, while Naked Wines sales rose by 26.7%. But top-line profits came in at £0.1m, 99.4% down on the £8.3m reported last year, and at the bottom line the company reported pre-tax loss of £4.4m after one-off writedowns, mostly relating to the acquisition of Naked Wines.

Profits, said the company, were down following a failed direct mail campaign at Naked Wines and a slowdown in sales at its commercial division. The company has also redirected money it would have spent on opening stores into marketing activities aimed at acquiring and retaining customers, and into bringing IT capabilities in-house.

“Our plan is working,” said group chief executive Rowan Gormley. “We said that we would deliver sustainable growth, not by opening more stores, but by investing in better customer service and better customer retention. Both of these are working – sales are up over 10% and the projects driving that sales growth, like nationwide next-day delivery, are on time and on budget.

“Now that we have built a solid platform for future growth, future cost growth will be much lower.

“We are reiterating our commitment to hitting our goal of delivering £500m sales by 2019, and we believe that will translate into healthy profit growth now that the step change in investment is complete.”

He said the retailer was moving from growth through opening stores to investing in acquiring and keeping customers. “By doing a better job of looking after our customers we will grow our customer base and sustainably and profitably grow sales,” he said. Majestic said that customer numbers were growing strongly, by 9.1% to 820,000, that customer retention had risen by 4%, and that the company would continue to invest in its transformation plan.

Looking ahead, Gormley said that the level of uncertainty over issues such as Brexit, exchange rates and geopolitics “makes planning interesting to say the least”. He added: “The one thing we can be certain about is that there is going to be change, and the winners will be the companies that adapt best to those changes. We aim to be one of those companies.”

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